-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VgUJlyqOTgWJz09etBvYqt7fUt2opR5X21dMm8+GU+WGawzVUNzgSiVQ9jOO6YoP om/YEYJifC35nvfynGvNvA== 0000927016-01-500905.txt : 20010514 0000927016-01-500905.hdr.sgml : 20010514 ACCESSION NUMBER: 0000927016-01-500905 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL CORP /RI/ CENTRAL INDEX KEY: 0000354948 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 050391383 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27878 FILM NUMBER: 1629493 BUSINESS ADDRESS: STREET 1: 180 WASHINGTON ST CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4014213600 10-Q 1 d10q.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 Commission file number 0-27878 First Financial Corp. (Exact name of registrant as specified in its charter) Rhode Island 05-0391383 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 180 Washington Street, Providence, Rhode Island 02903 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (401) 421-3600 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No ----- _____ At May 2, 2001, there were 1,328,041 shares of the Company's $1.00 par value stock issued, with 1,213,741 shares outstanding. FIRST FINANCIAL CORP. INDEX
PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements............................................................................. 1 Consolidated Balance Sheets - March 31, 2001 and December 31, 2000................................... 1 Consolidated Statements of Income - Three months ended March 31, 2001 and 2000....................... 2 Consolidated Statements of Stockholders' Equity and Comprehensive Income- Three months ended March 31, 2001 and year ended December 31, 2000.................................... 3 Consolidated Statements of Cash Flows - Three months ended March 31, 2001 and 2000................... 4 Notes to Consolidated Financial Statements - March 31, 2001.......................................... 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................................ 7 Item 3 - Quantitative and Qualitative Disclosures about Market Risk....................................... 13 PART II - OTHER INFORMATION Item 1 - Legal Proceedings................................................................................ 14 Item 2 - Changes in Securities............................................................................ 14 Item 3 - Defaults Upon Senior Securities.................................................................. 14 Item 4 - Submission of Matters to a Vote of Security Holders.............................................. 14 Item 5 - Other Information................................................................................ 14 Item 6 - Exhibits and Reports on Form 8-K................................................................. 14 SIGNATURES................................................................................................ 15 EXHIBITS Computation of per share earnings - Exhibit 11............................................................ 16
PART I - FINANCIAL INFORMATION Item 1 - Financial Statements FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2001 2000 ----------- ----------- ASSETS (Unaudited) CASH AND DUE FROM BANKS.............................................. $ 1,882,981 $ 3,055,863 SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL...................... 15,131,056 1,748,068 LOANS HELD FOR SALE.................................................. 1,114,704 505,000 INVESTMENT SECURITIES: Held-to-maturity (fair value: $14,082,713 and $22,451,901).......... 14,032,347 22,488,801 Available-for-sale.................................................. 39,696,920 31,923,655 ------------ ------------ Total investment securities........................................ 53,729,267 54,412,456 ------------ ------------ FEDERAL HOME LOAN BANK STOCK......................................... 1,091,500 716,000 LOANS: Commercial.......................................................... 11,809,505 13,099,260 Commercial real estate.............................................. 73,669,695 73,522,872 Residential real estate............................................. 12,703,475 13,377,532 Home equity lines of credit......................................... 2,557,457 2,948,764 Consumer............................................................ 1,010,887 939,063 ------------ ------------ 101,751,019 103,887,491 Less - Unearned discount............................................ 5,578 7,674 Allowance for loan losses........................................... 1,772,895 1,751,621 ------------ ------------ Net loans.......................................................... 99,972,546 102,128,196 ------------ ------------ PREMISES AND EQUIPMENT, net.......................................... 1,981,915 2,003,583 OTHER ASSETS......................................................... 3,111,003 3,802,341 ------------ ------------ TOTAL ASSETS......................................................... $178,014,972 $168,371,507 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS: Demand.............................................................. $ 18,202,891 $ 19,187,122 Savings and money market accounts................................... 23,867,504 25,084,287 Time deposits....................................................... 85,614,951 84,774,840 ------------ ------------ Total deposits.................................................... 127,685,346 129,046,249 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE....................... 8,514,320 9,574,571 FEDERAL HOME LOAN BANK ADVANCES...................................... 21,804,354 10,869,241 ACCRUED EXPENSES AND OTHER LIABILITIES............................... 2,611,701 2,390,731 ------------ ------------ TOTAL LIABILITIES.................................................... 160,615,721 151,880,792 ------------ ------------ STOCKHOLDERS' EQUITY: Common Stock, $1 par value Authorized - 5,000,000 shares Issued - 1,328,041 shares.......................................... 1,328,041 1,328,041 Surplus............................................................. 4,431,380 4,431,380 Retained earnings................................................... 12,218,349 11,892,318 Accumulated other comprehensive income (loss)....................... 176,566 (405,939) ------------ ------------ 18,154,336 17,245,800 Less - Treasury stock, at cost, 114,300 shares...................... 755,085 755,085 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY........................................... 17,399,251 16,490,715 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................... $178,014,972 $168,371,507 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 1 FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, ------------------- 2001 2000 ---- ---- (Unaudited) INTEREST INCOME: Interest and fees on loans...................................... $2,445,258 $2,325,210 Interest and dividends on investment securities- U.S. Government and agency obligations..................... 550,628 455,024 Collateralized mortgage obligations........................ 9,835 21,856 Mortgage-backed securities.................................... 62,847 82,590 Preferred stock............................................... 254,176 90,418 Marketable equity securities and other........................ 45,612 25,768 Interest on cash equivalents.................................... 90,770 107,516 ---------- ---------- Total interest income....................................... 3,459,126 3,108,382 ---------- ---------- INTEREST EXPENSE: Interest on deposits............................................ 1,413,841 1,170,151 Interest on repurchase agreements............................... 102,576 119,828 Interest on advances............................................ 248,221 201,467 ---------- ---------- Total interest expense....................................... 1,764,638 1,491,446 ---------- ---------- Net interest income.......................................... 1,694,488 1,616,936 PROVISION FOR LOAN LOSSES........................................ 25,000 50,000 ---------- ---------- Net interest income after provision for loan losses................................................... 1,669,488 1,566,936 NONINTEREST INCOME: Service charges on deposits..................................... 80,173 67,429 Gain on loan sales.............................................. 12,770 56,306 Other 134,752 75,545 ---------- ---------- Total noninterest income..................................... 227,695 199,280 ---------- ---------- NONINTEREST EXPENSE: Salaries and employee benefits................................. 631,445 587,365 Occupancy expense.............................................. 125,686 119,399 Equipment expense.............................................. 68,513 66,170 Other real estate owned net losses and expenses................ 1,200 166 Computer services.............................................. 68,233 63,383 Deposit insurance assessments.................................. 12,021 5,584 Other operating expenses....................................... 229,089 229,260 ---------- ---------- Total noninterest expense.................................... 1,136,187 1,071,327 ---------- ---------- Income before provision for income taxes..................... 760,996 694,889 PROVISION FOR INCOME TAXES....................................... 252,904 246,149 ---------- ---------- NET INCOME....................................................... $ 508,092 $ 448,740 ========== ========== Earnings per share: Basic........................................................ $0.42 $0.37 ========== ========== Diluted...................................................... $0.42 $0.37 ========== ========== Weighted average common shares outstanding....................... 1,213,741 1,215,297 Weighted average equivalent shares............................... ------- ------- ---------- ---------- Weighted average common and common stock equivalent shares outstanding............................................. 1,213,741 1,215,741 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 2 FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Accumulated Other Total Common Retained Comprehensive Treasury Stockholders' Comprehensive Stock Surplus Earnings Income (Loss) Stock Equity Income ----------- ---------- -------------- ------------- -------------- -------------- ----------- Balance, December 31, 1999.... $1,328,041 $4,431,380 $10,504,194 $(186,265) $(595,710) $15,481,640 Net income.................... ------- ------ 1,970,719 ------ ------ 1,970,719 $1,970,719 Other comprehensive income, net of tax: Unrealized holding losses, net....................... ------- ------ ------ (219,674) ------ (219,674) (219,674) ---------- of reclassification adjustment Comprehensive income......... $1,751,045 ========== Dividends declared ($.48 per share).................... (582,595) (582,595) Repurchase of 12,500 shares of common stock............... (159,375) (159,375) ---------- ---------- ----------- --------- --------- ----------- Balance, December 31, 2000.... 1,328,041 4,431,380 11,892,318 (405,939) (755,085) 16,490,715 Net income.................... ------- ------ 508,092 ------ ------ 508,092 $ 508,092 Other comprehensive income, net of tax: Unrealized holding gains, net....................... ------- ------ ------ 582,505 ------ 582,505 582,505 ---------- of reclassification adjustment Comprehensive income......... $1,090,597 ========== Dividends declared ($.15 per share)................... ------- ------ (182,061) ------ ------ (182,061) ---------- ---------- ----------- ----------- --------- ----------- Balance, March 31, 2001...... $1,328,041 $4,431,380 $12,218,349 $ 176,566 $(755,085) $17,399,251 ========== ========== =========== =========== ========= ===========
The accompanying notes are an integral part of these consolidated financial statements 3 FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, --------------------------------- 2001 2000 -------------- -------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income....................................................................... $ 508,092 $ 448,740 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for loan losses...................................................... 25,000 50,000 Depreciation and amortization................................................... 72,141 69,682 Gains on sales of loans......................................................... (12,770) (56,306) Proceeds from sales of loans.................................................... 240,711 1,328,234 Loans originated for sale....................................................... (837,645) (2,592,595) Net increase (decrease) in deferred loan fees................................... 2,368 (5,290) Net accretion on investment securities held-to-maturity......................... (15,102) (2,597) Net accretion on investment securities available-for-sale....................... (85,507) (80,585) Net decrease in unearned discount............................................... (2,096) (5,112) Net decrease (increase) in other assets......................................... 303,001 (692,461) Net increase in accrued expenses and other liabilities.......................... 220,970 628,192 ------------- ------------ Net cash provided by (used in) operating activities..................... 419,163 (910,098) ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of investment securities held-to-maturity................................................................ 9,471,556 370,222 Proceeds from maturities of investment securities available-for-sale.............................................................. 68,219,899 66,045,772 Purchase of investment securities held-to-maturity................................ (1,000,000) (6,749,766) Purchase of investment securities available-for-sale.............................. (74,936,815) (82,314,285) Purchase of Federal Home Loan Bank stock.......................................... (375,500) ------ Net decrease (increase) in loans.................................................. 2,130,378 (2,826,817) Purchase of premises and equipment................................................ (50,473) (27,221) ------------- ------------ Net cash provided by (used in) investing activities..................... 3,459,045 (25,502,095) -------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in demand accounts........................................ (984,231) 3,483,174 Net (decrease) and money market accounts.......................................... (1,216,783) (1,870,787) Net increase in time deposits..................................................... 840,111 23,268,360 Net (decrease) increase in repurchase agreements.................................. (1,060,251) 46,299 Net increase (decrease) in Federal Home Loan Bank advances........................ 10,935,113 (63,858) Purchase of common stock for treasury............................................. ------ (159,375) Dividends paid.................................................................... (182,061) (145,649) ------------- ------------ Net cash provided by financing activities............................... 8,331,898 24,558,164 ------------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................................................................... 12,210,106 (1,854,029) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................... 4,803,931 9,244,055 ------------- ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD........................................... $ 17,014,037 $ 7,390,026 ============= ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid..................................................................... $ 1,774,111 $ 1,357,218 ============= ============ Income taxes paid................................................................. $ 44,456 $ 145,000 ============= ============ SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: Transfer of loans to OREO......................................................... $ ------ $ 100,000 ============= ============
The accompanying notes are an integral part of these consolidated financial statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 2001 (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, primarily consisting of normal recurring adjustments, have been included. Operating results for the three months ended March 31, 2001, are not necessarily indicative of the results that may be expected for the year ending December 31, 2001, or any other interim period. For further information refer to the consolidated financial statements, notes and other information included in the Company's Annual Report and Form 10-K for the period ended December 31, 2000, filed with the Securities and Exchange Commission. (2) DIVIDEND DECLARATION On April 2, 2001, the Company declared dividends of $182,061 or $.15 per share to all common stockholders of record on May 1, 2001, payable on May 14, 2001. (3) RECENT DEVELOPMENTS On January 22, 2001, the Company filed an election with the Federal Reserve Bank of Boston to become a financial holding company, pursuant to the Gramm-Leach-Bliley Act of 1999. On February 7, 2001, the Company's election became effective. The Company adopted SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities", as amended, on January 1, 2001. This statement requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and to measure these instruments at fair value. Adoption of this statement had no impact on the Company's consolidated financial statements. (4) BUSINESS SEGMENTS The Company's community banking business segment consists of commercial and retail banking. The community banking business segment is managed as a single strategic unit which derives its revenue from a wide range of banking services, including investing and lending activities and acceptance of demand, savings and time deposits. There is no major customer and the Company operates within a single geographic area (southeastern New England). Nonreportable operating segments of the Company's operations which do not have similar characteristics to the community banking operations and do not meet the quantitative thresholds requiring disclosure, are included in the Other category in the disclosure of business segments below. These nonreportable segments include the Parent Company. 5 The accounting policies used in the disclosure of business segments for these interim financial statements are the same as those used in the December 31, 2000 Annual Report and Form 10-K. The consolidation adjustments reflect certain eliminations of intersegment revenue. Reportable specific information and reconciliation to consolidated financial information is as follows:
Community Other Adjustments Banking Other and Eliminations Consolidated Three Months Ended March 31, 2001 Net Interest Income $1,688,423 $525,996 $(519,931) $1,694,488 Provision for Loan Losses 25,000 ----- ----- 25,000 Total Noninterest Income 227,695 ----- ----- 227,695 Total Noninterest Expense 1,112,187 24,000 ----- 1,136,187 Net Income 519,931 508,092 (519,931) 508,092 Three Months Ended March 31, 2000 Net Interest Income $1,610,878 $465,029 $(458,971) $1,616,936 Provision for Loan Losses 50,000 ----- ----- 50,000 Total Noninterest Income 199,280 ----- ----- 199,280 Total Noninterest Expense 1,047,327 24,000 ----- 1,071,327 Net Income 458,971 448,740 (458,971) 448,740
6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations General - ------- First Financial Corp. ("Company") is a financial holding company that was organized under Rhode Island law in 1980 for the purposes of owning all of the outstanding capital stock of First Bank and Trust Company ("Bank") and providing greater flexibility in helping the Bank achieve its business objectives. The Bank is a Rhode Island chartered commercial bank that was originally chartered and opened for business on February 14, 1972. The Bank provides a broad range of lending and deposit products primarily to individuals and small businesses ($10 million or less in total revenues). Although the Bank has full commercial banking and trust powers, it has not exercised its trust powers and does not, at the current time, provide asset management or trust administration services. The Bank's deposits are insured by the FDIC up to applicable limits. The Bank offers a variety of commercial and consumer financial products and services designed to satisfy the deposit and loan needs of its customers. The Bank's deposit products include interest-bearing and noninterest-bearing checking accounts, money market accounts, passbook and statement savings accounts, club accounts, and short-term and long-term certificates of deposit. The Bank also offers customary check collection services, wire transfers, safe deposit box rentals, automated teller machine (ATM) cards and debit cards and services. Loan products include commercial, commercial mortgage, residential mortgage, construction, home equity and a variety of consumer loans. The Bank's products and services are delivered through it's four branch network system. The Bank's main office and branch are located in Providence, Rhode Island with branches in Cranston, Richmond and North Kingstown, Rhode Island. The Company's results of operations depend primarily on its net interest income, which is the difference between interest and dividend income on interest-earning assets and interest expense on its interest-bearing liabilities. Its interest- earning assets consist primarily of loans and investment securities, while its interest-bearing liabilities consist primarily of deposits, securities sold under agreements to repurchase and Federal Home Loan Bank advances. The Company's net income is also affected by its level of noninterest income, including fees and service charges, as well as by its noninterest expenses, such as salary and employee benefits, provisions to the allowance for loan losses, occupancy costs and, when necessary, expenses related to other real estate owned acquired through foreclosure (OREO) and to the administration of nonperforming and other classified assets. Summary - ------- For the three months ended March 31, 2001, the Company reported net income of $508,092 compared to net income of $448,740 for the three months ended March 31, 2000, or an increase of 13.2%. Basic and diluted net income per share were $.42 for the quarter ended March 31, 2001, based on 1,213,741 weighted average common and common stock equivalent shares outstanding, compared to $.37 per share in the first quarter of 2000, based on 1,215,297 weighted average common and common stock equivalent shares outstanding. The first quarter ended March 31, 2001 was the strongest first quarter in the Company's history. Overall, this achievement was accomplished as a result of (i) a slight increase in net interest income with balance sheet growth negating a drop in margin in a rapidly declining interest rate environment, (ii) strong asset quality, (iii) solid results from the residential mortgage program and, (iv) control in overhead spending. Total assets increased $9.6 million or 5.7% to $178.0 million at March 31, 2001 from $168.4 million at December 31, 2000. The loan portfolio, net of unearned discount, decreased $2.1 million or 2.0% to $101.8 million at March 31, 2001 from $103.9 million at December 31, 2000. This decrease resulted primarily from the Company's inability to close several substantial credits within the first quarter (which closed in April 2001) while, during the same period, recording unanticipated payoffs of several sizeable loans. The Company's investment portfolio remained virtually flat at $53.7 million at March 31, 2001 compared to $54.4 million at December 31, 2000. Cash and cash equivalents increased $12.2 7 million to $17.0 million at March 31, 2001, from $4.8 million at December 31, 2000. Funding for this increase occurred within wholesale funding sources, specifically Federal Home Loan Bank (FHLB) advances which increased $10.9 million to $21.8 million at March 31, 2001 from $10.9 million at December 31, 2000. During the first quarter of 2001, the Company invested $5 million of a FHLB advance in government agency preferred stock and used another $6 million advance to build liquidity in anticipation of the April 2001 maturity of nearly $30 million in time deposits, of which the Company retained approximately $24 million. Financial Condition Asset Quality - ------------- The following table sets forth information regarding nonperforming assets and delinquent loans 30-89 days past due as to interest or principal and held by the Company at the dates indicated.
As of and for the As of and for the three months ended year ended March 31, December 31, ------------------- ---------------- 2001 2000 2000 ------ ------ ------ (Dollars in Thousands) Nonperforming loans......................... $ 30 $ 193 $ -0- Other real estate owned..................... $ -0- $ 100 $ -0- Total nonperforming assets.................. $ 30 $ 293 $ -0- Loans 30-89 days delinquent................. $ 656 $ 676 $ 460 Nonperforming assets to total assets........ 0.02% 0.17% NM Nonperforming loans to total loans.......... 0.03% 0.30% NM Net loan (recoveries) charge-offs to average loans........................... 0.004% ( 0.01)% (0.02)% Allowance for loan losses to total loans...................................... 1.74% 1.65% 1.69% Allowance for loan losses to nonperforming loans (multiple).......... 58.23X 8.36X NM
NM - Not Meaningful The following represents the activity in the allowance for loan losses for the three months ended March 31, 2001 and 2000: Three Months Ended March 31, ---------------------- 2001 2000 ---------- ---------- Balance at beginning of period........ $1,751,621 $1,556,405 Provision........................ 25,000 50,000 Loan charge-offs................. (4,096) (1,440) Recoveries....................... 370 10,762 ---------- ---------- Balance at end of period.............. $1,772,895 $1,615,727 ========== ========== The Company continually reviews its delinquency position, underwriting and appraisal procedures, charge-off experience and current real estate market conditions with respect to its entire loan portfolio. While management believes it uses the best information available in establishing the allowance for loan losses, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. 8 Deposits and Other Borrowings - ----------------------------- Total deposits decreased $1.4 million or 1.1% to $127.7 million at March 31, 2001 from $129.1 million at December 31, 2000. During the three months ended March 31, 2001, demand deposits decreased $1.0 million, savings and money market accounts decreased $1.2 million, and time deposits increased $.8 million. Securities sold under agreements to repurchase (REPO) decreased $1.1 million to $8.5 million at March 31, 2001 from $9.6 million at December 31, 2000. During the first quarter of 2001, a $5 million REPO bearing an interest rate of 5.67%, matured. The Company refinanced $4 million for a term of 3 years at an interest rate of 5.38%. As previously mentioned, the Company took down $11 million in FHLB advances during the first quarter of 2001. One of the advances for $5 million at 4.58% with a 10 year/2 year call structure, was used to purchase government agency preferred stock at an adjustable rate which resets every two years. The other advance for $6 million at 4.50% with a 10 year/1 year call structure was used for liquidity purposes. Results of Operations Net Interest Income - ------------------- Net interest income (the difference between interest and dividends earned on loans and investments and interest paid on deposits and other borrowings) increased to $1,694,488 for the three months ended March 31, 2001, compared to $1,616,936 for the first quarter of 2000. This increase was the result of an increase in interest-earning assets, offset somewhat by a decline in net interest spreads and margins. 9 The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities. Average balances are derived from daily balances. Loans are net of unearned discount. Non-accrual loans are included in the average balances used in calculating this table.
Three Months Ended March 31, --------------------------- 2001 2000 ---------------------------------------- ------------------------------- Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ------- ------- ---- ------- ------ ---- (Dollars in Thousands) Interest-earning assets: Loans..................................... $103,232,728 $ 2,445,258 9.47% $ 97,251,579 $2,325,210 9.56% Investment securities - AFS............... 36,249,923 611,346 6.75 27,026,500 415,534 6.15 Investment securities - HTM.............. 18,901,020 295,847 6.26 17,539,809 248,066 5.66 Securities purchased under agreements to resell................................. 8,495,891 90,770 4.27 9,142,565 107,515 4.70 Federal Home Loan Bank Stock and other.... 1,113,530 15,905 5.71 761,772 12,057 6.33 ------------ ------------ ---- ------------ ---------- ---- Total interest-earning assets............... 167,993,092 3,459,126 8.24 151,722,225 3,108,382 8.19 ------------ ---- ---------- ---- Noninterest-earning assets: Cash and due from banks.................... 2,321,289 3,456,438 Premises and equipment................... 1,998,235 2,153,863 Other real estate owned.................. 0 26,374 Allowance for loan losses................ (1,762,241) (1,589,816) Other assets............................. 3,115,662 1,971,359 ------------ ------------ Total noninterest-earning assets............ 5,672,945 6,018,218 ------------ ------------ Total assets................................ $173,666,037 $157,740,443 ============ ============ Interest-bearing liabilities: Deposits: Interest bearing demand and NOW deposits............................. $ 3,044,657 10,992 1.44 $ 3,285,048 11,992 1.46 Savings deposits...................... 18,508,988 108,230 2.34 17,484,865 92,527 2.12 Money market deposits................. 2,547,615 12,585 1.98 1,398,056 6,758 1.93 Time deposits......................... 85,310,889 1,282,034 6.01 77,557,703 1,058,874 5.46 Securities sold under agreements to repurchase............................. 9,119,984 102,576 4.50 9,430,886 119,828 5.08 Federal Home Loan Bank advances......... 18,485,820 248,221 5.37 13,571,818 201,467 5.94 ------------ ------------ ---- ------------ ---------- ---- Total interest-bearing liabilities.......... 137,017,953 1,764,638 5.15 122,728,376 1,491,446 4.86 ------------ ---- ---------- ---- Noninterest-bearing liabilities: Noninterest-bearing deposits............. 17,789,535 18,140,751 Other liabilities........................ 2,149,149 1,526,569 ------------ ------------ Total noninterest-bearing liabilities....... 19,938,684 19,667,320 Stockholders' equity........................ 16,709,400 15,344,747 ------------ ------------ Total liabilities and stockholders' equity.. $173,666,037 $157,740,443 ============ ============ Net interest income......................... $ 1,694,488 $1,616,936 ============ ========== Interest spread............................. 3.09% 3.33% ==== ==== Net interest margin......................... 4.03% 4.26% ==== ====
10 Total interest income increased $350,744 or 11.3% to $3,459,126 from $3,108,382. Quarterly average interest-earning assets increased $16.3 million to $168.0. This growth contributed $316,646 to the increase in total interest income. The yield on earning assets improved to 8.24% versus 8.19% and added another $34,098 to the improvement in total interest income. Total interest expense increased $273,192 or 18.3% to $1,764,638 from $1,491,446. Quarterly average interest- bearing liabilities increased $14.3 million to $137.0 million. This growth, a substantial portion of which occurred in high-cost retail time deposits, accounted for $189,799 to the increase in total interest expense. The Company's cost of funds jumped 29 basis points to 5.15% from 4.86%. This increase contributed another $83,393 to the increase in total interest expense. Once again, the preponderance of this increase took place within retail time deposits and specifically the full quarter's impact of February 2000's 14-month time deposit promotion at 7%. Overall, net interest income increased $77,552 to $1,694,488 from $1,616,936. Balance sheet growth (volume) accounted for $126,847 of this increase while a decline in net interest spread (rate) to 3.08% from 3.33% reduced net interest income $49,295. The Company's net interest margin declined 23 BP to 4.03% from 4.26%. During the first quarter of 2001, the Federal Reserve reduced the targeted fed funds rate on three occasions by a total of 150 basis points. This action led to a similar decline in the Company's prime interest rate, and resulted in the immediate repricing of nearly $20 million in prime rate indexed loans. Although the Company maintains a negative one-year gap position and is interest rate sensitive on the liability side of the balance sheet, most retail deposits reprice over time rather than immediately, as is the case with prime rate indexed loans. During the second quarter of 2001, nearly 57% of retail time deposits will be subject to repricing and/or maturity. Provision for Loan Losses - ------------------------- The provision for loan losses totaled $25,000 for the three months ended March 31, 2001, compared to $50,000 during the same three month period of the prior year. During the quarter the Company recorded net charge-offs of $3,726 or .004% of quarterly average loans. With the loan portfolio decline and the modest first quarter charge-offs, the allowance for loan losses to total loans was 1.74% at March 31, 2001 compared to 1.69% at December 31, 2000. Noninterest Income - ------------------ Noninterest income increased $28,515 or 14.3% to $227,695 from $199,280. Despite a $43,535 reduction in SBA loan sale gains, increases in service charges on deposits ($12,744), ATM surcharge fees ($6,612), loan servicing fees ($12,622), and mortgage program fees ($36,715) accounted for the overall increase in noninterest income. Noninterest Expense - ------------------- Total overhead spending increased $64,860 or 6.1% to $1,136,187 in the first quarter of 2001. Exclusive of the $43,500 increase in pension costs, overhead spending increased a modest 2.0%. No single item had a significant deviation from last year's level of spending. Income Taxes - ------------ Income taxes for the three months ended March 31,2001 and 2000, were 33.2% and 35.4%, respectively, of pretax income. The Company's combined federal and state (net of federal benefit) statutory income tax rate is 39.9%. The Company's effective combined federal and state tax rate was lower than the statutory rate primarily due to the exclusion of interest income on U.S. Treasury obligations from state taxable income and interest and dividend income on certain government agency debt and equity securities from federal and state taxable income. 11 Capital Adequacy - ---------------- The FDIC and the Federal Reserve Board have established guidelines with respect to the maintenance of appropriate levels of capital by both the Company and the Bank. Set forth below is a summary of FDIC and Federal Reserve Board capital requirements, and the Company's and the Bank's capital ratios as of March 31, 2001: Regulatory Minimum (1) Actual ----------- ------ The Company Risk-based: Tier 1........... 4.00% 13.95% Totals........... 8.00 15.20 Leverage........... 3.00 9.54 The Bank Risk-based: Tier 1........... 4.00% 14.46% Totals........... 8.00 15.71 Leverage........... 3.00 9.89 (1) The 3% regulatory minimum leverage ratio applies only to certain highly- rated banks. Other institutions are subject to higher requirements. Asset/Liability Management - -------------------------- The Company's objective with respect to asset/liability management is to position the Company so that sudden changes in interest rates do not have a material impact on net interest income and stockholders' equity. The primary objective is to manage the assets and liabilities to provide for profitability and capital at prudent levels of liquidity and interest rate, credit, and market risk. The Company uses a static gap measurement as well as a modeling approach to review its level of interest rate risk. The internal targets established by the Company are to maintain: (i) a static gap of no more than a positive 10% or negative 15% of total assets at the one year time frame; (ii) a change in economic market value from base present value of no more than positive or negative 30%; and (iii) a change in net interest income from base of no more than positive or negative 17%. At March 31, 2001, the Company's one year static gap position was a negative $13.7 million or 7.7% of total assets. By using simulation modeling techniques, the Company is able to measure its interest rate risk exposure as determined by the impact of sudden movements in interest rates on net interest income and equity. This exposure is termed `earnings-at-risk' and `equity-at-risk'. At March 31, 2001, the Company's earnings-at-risk under a +/- 200 basis point interest rate shock test measured a negative 0.92% in a worst case scenario. Under a similar test, the Company's equity-at-risk measured a negative 6.26% of market value of equity at March 31, 2001. At March 31, 2001, the Company's earnings-at-risk and equity-at-risk fell well within tolerance levels established by internal policy. Liquidity - --------- Liquidity is defined as the ability to meet current and future financial obligations of a short-term nature. The Company further defines liquidity as the ability to respond to the needs of depositors and borrowers and to earning enhancement opportunities in a changing marketplace. Primary sources of liquidity consist of deposit inflows, loan repayments, securities sold under agreements to repurchase, FHLB advances, maturity of investment securities and sales of securities from the available-for-sale portfolio. These sources fund the Bank's lending and investment activities. 12 At March 31, 2001, cash and due from banks, securities purchased under agreements to resell, and short-term investments (unpledged and maturing within one year) amounted to $35.5 million, or 20.08% of total assets. Management is responsible for establishing and monitoring liquidity targets as well as strategies and tactics to meet these targets. Through membership in the Federal Home Loan Bank of Boston, the Company has an unused borrowing capacity of nearly $19.6 million, which could assist the Company in meeting its liquidity needs and funding its asset mix. The Company believes that there are no adverse trends in the Company's liquidity or capital reserves, and the Company believes that it maintains adequate liquidity to meet its commitments. Item 3 - Quantitative and Qualitative Disclosures about Market Risk Refer to "Asset/Liability Management" within Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations". 13 PART II - OTHER INFORMATION Item 1 - Legal Proceedings The Company and the Bank are involved in routine legal proceedings occurring in the ordinary course of business. In the opinion of management, final disposition of these lawsuits will not have a material adverse effect on the financial condition or results of operations of the Company or the Bank in the aggregate. Item 2 - Changes in Securities Not applicable. Item 3 - Defaults Upon Senior Securities Not applicable. Item 4 - Submission of Matters to a Vote of Security Holders Not applicable Item 5 - Other Information Not Applicable Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description -------------- ----------- 11 Computation of Per Share Earnings (b) Reports on Form 8-K None 14 SIGNATURES Under the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. First Financial Corp. May 2, 2001 /s/ Patrick J. Shanahan, Jr. - ---------------------- ---------------------------- Date Patrick J. Shanahan, Jr. Chairman, President and Chief Executive Officer May 2, 2001 /s/ John A. Macomber - ---------------------- -------------------------- Date John A. Macomber Vice President, Treasurer and Chief Financial Officer 15 EX-11 2 dex11.txt COMPUTATION OF PER SHARE DATA Exhibit 11 - Computation of Per Share Earnings Three Months Ended March 31, ---------------------- 2001 2000 ---- ---- Weighted average common shares outstanding 1,213,741 1,215,297 Dilutive effect of common stock equivalents ----- ----- ---------- ---------- Weighted average common and common stock equivalent shares outstanding 1,213,741 1,215,297 ========== ========== Net income $ 508,092 $ 448,740 ========== ========== Earnings per share: Basic $ 0.42 $ 0.37 ========== ========== Diluted $ 0.42 $ 0.37 ========== ========== 16 -----END PRIVACY-ENHANCED MESSAGE-----